With Nokia Siemens Networks and Ericsson laying off workers, Alcael-Lucent and Motorola reporting quarterly losses, and Nortel filing for bankruptcy protection, the economic downturn is taking its toll on the global telecom industry. In these trying times, new and emerging technologies and equipment such as 3G, long term evolution (LTE) and femtocells present an opportunity for telecom operators to spur consumer demand, and for equipment manufacturers and vendors to benefit from new investments in infrastructure. At the same time, deploying any new technology has its own set of challenges.
tele.net looks at 3G and other emerging telecom technologies and the opportunities and challenges associated with deploying them in the market…
3G
3G can open up new avenues for telecom service providers and consumers since it enables high speed data transfers and a host of applications such as video chatting, mobile TV and mobile gaming. According to the CDMA Development Group, there will be over 800 million wireless CDMA (WCDMA) and 450 million CDMA2000 subscribers globally by 2011. The subscriber base will be driven by the expected issue of new 3G licences in India, Vietnam, Thailand and Pakistan.
The potential of the technology in terms of infrastructure investments is also significant. On the customer premises equipment (CPE) side, it is estimated that 5-7 per cent of all mobile handsets will be 3G enabled by 2010-11, which will necessitate investments on network infrastructure.
In China, according to the Ministry of Industry and Information Technology, the construction of 3G infrastructure will require funds of about 280 billion yuan. It will also lead to the growth of related segments such as semiconductors, equipment manufacturing and software. According to industry estimates, up to 2 trillion yuan in private sector investment may be made in the whole industry chain over the next two to three years, which amounts to 0.5-1 per cent of China’s GDP.
However, in India, around 80 per cent of the investment in 3G networks has already been made while rolling out 2G networks. Most operators’ core networks are already 3G enabled. Service providers are now spending funds on overlaying the access network and marketing services.
In India, 3G is expected to provide a much-needed impetus to broadband penetration. According to the Telecom Regulatory Authority of India, over 70 million wireless subscribers are already accessing the internet from their mobile phones. The number is bound to increase significantly with service providers launching 3G on a wide scale. Research firm RNCOS estimates that 15 per cent of the total broadband subscriber base in India will be using high speed wireless data services via 3G modems or data cards by 2012.
Value-added services will be a key growth driver for 3G as operators will be able to offer a full suite of 3G-ready data products such as video calling and video ringback tones. Though many of these products have already been developed, the current networks do not have the required bandwidth to support the services. With 3G, more mobile-oriented websites will be launched, leading to an increase in m-commerce and m-advertising. Rural India will be a key market for 3G applications such as telemedicine, eeducation and e-governance.
However, there are many issues to resolve. From a technology perspective, while UMTS and CDMA2000 follow very similar evolutionary paths and are comparable, for WCDMA technology, spectrum is an issue in many markets since it is being deployed at 2.1 GHz ?? a spectrum which is not as well suited for radio frequency transmission as 900 MHz or 1800 MHz. This problem is being addressed through in-band solutions and a change in regulatory norms that allows UMTS operators to deploy services in their existing GSM spectrum.
The correct pricing of 3G services is also important. In India, given the price sensitivity of consumers, it is essential that 3G services are available at tariffs that are comparable to the current broadband tariffs. However, with the government setting the base price of 3G spectrum at Rs 20 billion, it might be difficult to offer user-friendly tariffs. It is essential that Indian telecom operators do not suffer from the same problems as European operators did after the 3G auctions.
Operators may also face several operational difficulties with respect to 3G.According to Sharat Chandra, chief operating officer and president, strategy andnew technologies, GTL, “As network equipment proliferates and services converge, it creates operations and management challenges ?? especially for carriers cohabitating 2G and 3G.” The operations and maintenance requirements of hierarchical management structures coexisting with flat network models create challenges for network planners.Managing a 3G network will also be more difficult because both high and low speed users are supported on the same network.This will make overall radio frequency planning more complex. The extensive network upgradation required to provide 3G services will also necessitate substantial investments.
The key concern in India is the delay in 3G spectrum auctions. There must not be any further delay and, once the auctions are through, the operator must roll out services aggressively.
While 3G might be an attractive proposition in some high-revenue-generating urban areas, deployment in rural India, which accounts for 70 per cent of the population, will be an issue at least for the next four years considering the high prices of 3G handsets, the higher cost of rural deployment, and the fact that even 2G coverage is currently limited to about 50 per cent of the country’s population.
LTE
Commercial LTE products are expected to be launched this year, with the bulk of the deployments set for 2012-13. Verizon has already announced its LTE plans and intends to carry out a US-wide expansion in the 700 MHz band. According to many analysts, Asian operators should invest in LTE instead of high speed packet access (HSPA)/HSPA+ since LTE offers numerous benefits.
For example, LTE offers significant flexibility with respect to spectrum. It can be deployed in spectrum bands ranging from 1.25 MHz to 20 MHz in multiple frequencies including 2.6 GHz. LTE also delivers over four times the sector throughput of HSPA and over twice that of HSPA+, thus increasing the number of users that can be supported on the network. HSPA and HSPA+ also require significant investments in equipment and ancillaries like backhaul. Though LTE also needs such investments, the technology is more cost effective as it has a lower cost per bit. So, it presents an opportunity for operators to leapfrog to 4G if they have not already opted for HSPA or HSPA+.
However, LTE is still at a nascent stage globally. The key challenges of migrating to LTE are managing the technology risk, maintaining network and service quality during the transition, managing the capital expenditure and controlling backhaul costs. Moreover, with the economic slowdown, it may take time for operators to invest in this new technology.
Femtocells
Femtocells or home base stations, with operational advantages and low capital requirements, offer significant advantages for users and service providers. Cellular subscribers can use femtocells to make cheaper and more reliable calls through their local broadband connections when indoors. Cellular operators can benefit as femtocells enable more effective use of spectrum and can quickly evolve to incorporate advanced management capabilities with support for features such as remote diagnostics, configuration and updates.
The technology is gaining traction globally with operator trials taking place and industry majors becoming members of the Femto Forum. According to research group Forward Concepts, the market for femtocells is estimated to expand at a compounded annual growth rate (CAGR) of 138 per cent to reach $1.5 billion by 2012. This signifies opportunities for the semiconductor and other ancillary sectors as well. Meanwhile, global femtocell equipment revenues are expected to grow at a CAGR of 126 per cent to $4.9 billion in 2012 from 2008. This will include femtocell-integrated home gateway shipments, which are projected to exceed 23 million units in 2012. Western Europe will be the largest market accounting for 32 per cent of the revenue, followed by North America with a 22 per cent share.
The challenges to femtocell deployment include the cost of femtocell equipment, which is still not low enough for the mass market. Each femtocell unit currently costs around $200. However, carriers can subsidise the units in order to encourage early adopters. In the first US femtocell trials, Sprint sold its Airave femtocell units for about $50 while charging customers a flat monthly rate of $15 for individual plans and $30 for family plans. However, since subsidising femtocell equipment costs is not a viable long-term strategy, the industry must figure out a way to lower the cost of femtocell CPE. According to the Femto Forum, operators need to source devices in the right volumes and at the right prices.
Another important issue is minimising radio frequency interference. If macrocell and femtocell networks use the same frequency band as a single-frequency CDMA systems, interference might occur, thereby degrading network capacity and quality of service. In multidwelling units, multiple femtocells can interfere not only with the macrocell network but also with each other. While carriers can deploy femtocell and macrocell networks on different radio frequencies, doing so would be expensive considering the high costs of spectrum.
There are also several consumer concerns that must be addressed since these base stations are located at home. For example, consumers may perceive safety risks from femtocells if, say, children are around. Consumer perception regarding the effects from exposure to radio waves from femtocell systems must also be altered. Moreover, since femtocells use residential IP broadband connections, consumers will plug femtocells into the internet via cable modem and DSL routers. Using the internet as a backhaul network will raise a number of security issues: how to protect the integrity of the operators’ core networks from the public environment of the internet, how to protect the integrity of the users’ traffic, and how to support seamless transitions between the macrocell and femtocell networks.
Technologies and equipment such as 3G, LTE and femtocells offer consumers the benefits of ubiquitous connectivity and faster download speeds. However, to capitalise on the advantages, operators and technology majors will have to address the issues that are associated with these new offerings. If the challenges are properly addressed, these new services can potentially change the way people communicate with each other.
